Bill to Recall HVCC/Appraisers In the News.

This week in congress a one page bill was introduced to revoke the two month old HVCC (Home Valuation Code of Conduct). To recap the code was designed to completely separate the appraiser from the loan officer to reduce pressure from the Mortgage company and create appraiser Independence. Not a bad thing But this code combined with declining markets and strict data standards from mortgage companies has generally bought appraised values down.



So it is of no surprise that this is slowly becoming news. On Tuesday NBC is having a segment on its nightly news called " Appraise This".



Recently the National Association of Realtors answered concerns from its members over this subject. NBC Chicago also ran a piece on that. Here they did blame the appraiser, citing some points that rarely happen as common place and thoroughly over simplifying the issue.



Here are some more details as to why appraiser is just a cog in a big machine and has nothing to with this problem.



The code has given rise to Appraisal Management Companies (AMC'S) which act as gophers between the appraisal and mortgage companies. (see previous blog). The appraisal management companies are not a very big part of the problem. Certainly they've driven up costs. Also a lot of valuation issues start with "out of state" review appraisers, who work for the AMC's, which have no idea about local neighborhood's which leads to an even more conservative opinion of value.



However a bigger part of the problem is unrealistic appraisal requirements by mortgage companies which in themselves control value. For example the mortgage companies require at least two sales within 3 months of the date of appraisal. This all to often includes a foreclosure as only available data in this category. And we all know what that does to value. There are alternative ways but these would be rejected by the banks.



So don't blame the appraisers.



It should be remembered that problems are only exacerbated by the declining markets. In a stable market these two points would not be such a problem.